The GST Council of India has officially reduced GST rates applicable on Electric Vehicles from 12% to 5%. This rate cut comes after the Union Finance Minister, Nirmala Sitharamaiyan, had moved a proposal to the council for the GST reduction during her presentation of the Union Budget earlier this month. The lower GST rate of 5% will come into effect from August 1, 2019. The Indian car market is still in its nascent stages of adopting electric vehicles. In the four-wheeler market, there is only a handful off all-electric cars on sale. The most popular ones include the recently launched Hyundai Kona, the fleet-only Tata Tigor Electric, and the Mahindra e-Verito. While Hyundai officials had earlier claimed that a reduction in GST rates will decrease the Kona Electric’s price by around Rs. 1.4 lakh, no official announcement regarding the same has been made yet. Similarly, we are yet to hear from Tata and Mahindra about the impact of the lower GST rates on their electric cars.
In addition to the GST rate cut, the Government of India has also announced proposals related to making interest payments on electric vehicle loans eligible for tax deductions, which could result in savings of up to Rs. 2.5 lakh over the loan tenure. All these steps are being taken to motivate customers to opt for electric cars in the future. The government has also exempted electric car parts being imported in the country from any excise duty.
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